Quarterly Tax Returns

Reporter: (Bienna Mae S. Cuebillas)

Individual tax returns for income derived from business and/or practice of the profession
are required to be filed on a quarterly and annual basis (regardless of the results of operations).
BIR Revenue Regulations No. 18-98 requires self employed individuals to file income tax
returns on a quarterly basis. The amount of income and the corresponding allowable business
expenses are reported on a cumulative basis.
Quarterly Returns
1st Quarter May 15
2nd Quarter Aug.15 (45 days after the end of the Quarter)
3rd Quarter Nov. 15 (45 days after the end of the Quarter)

Annual Return
Final Adjusted return April 15 of the succeeding year

FORMULA:
ILLUSTRATION
The following cumulative balances on income and expenses in 2020 of Juan
Dela Cruz were given to you:

SELLING PRICE: P400 000

COST: P320 000

REQUIRED:
Using above information, compute the following for 2020:
1. Income Tax Payable, First Quarter
2. Income Tax Payable, Second Quarter
3. Income Tax Payable, Third Quarter
4. Income Tax Payable, Fourth Quarter
5. Final Tax on passive income
6. Capital gains tax
ANSWERS:
1.) P10 000 2.) P63 750 3.) 18 7504.)37 500
5.) P7 960 6.) CGT(Land)=P24 000

SOLUTION: (#1-4; Quarterly Income Tax Due) :

SOLUTION (5#; Final Taxes on Passive Income)

Income Tax Due if Married Individual

Reporter: (Jessica B. Baloncio)

Under RA 10963, husband and wife shall compute separately their individual
income tax based on their respective total taxable income. Provided, that if any income
cannot be definitely attributed to or identified as income exclusively earned or realized
by either of the spouses, the same shall be divided equally between the spouses for the
purpose of determining their respective taxable income.

Married Taxpayers – Filing of ITR

Married individuals, whether citizens, resident or non-resident aliens, who do not
derive income purely from compensation, shall file a return for the taxable year to
include the income of both spouses, but where it is impracticable for the spouses to file
one return, each spouse may file a separate return of income but the returns so filed
shall be consolidated by the BIR for purposes of verification for the taxable year.
.

ILLUSTRATION
Mr. and Mrs. Pinagpala, both CPA’s and residents of the Philippines, with 6 minor
children, had the following data for taxable year 2023;
Salaries, wife P600,000
Bonus (13th month pay), wife 60,000
Professional Fees, (net of 10% withholding tax) 7,200,000
Expenses – Practice of profession 3,200,000
Rental income (net of 5% withholding tax) 712,500
Rental expenses 280,000
Other income, husband 840,000
The taxable income of Mr. Pinagpala is:
a. P3,475,000 c. P3,335,000
b. P3,235,000 d. P4,800,000

ILLUSTRATION
Mr. Mrs.
Salaries – Wife P600,00
-
Taxable 13th month pay -
-
Professional fees P4,000,000 P4,000,000
(gross)
Professional expenses (1,600,000) (1,600,000)
Rental income (gross) 375,000 375,000
Rental expenses (140,000) (140,000)
Other income - Husband 840,000 840,000
Taxable Net Income P3,475,000 P3,235,000

Minimum Wage Earners (MWE)

Reporter: (Angelic Brutas)

* The term "statutory minimum wage earner (SMW)" or "minimum wage earner
(MWE)" under RA 9504 shall refer to a worker in the private sector paid the statutory
minimum wage.
* An employee in the public sector with compensation income of not more than
the statutory minimum wage in the non-agricultural sector where he/she is assigned.
Regional Tripartite Wage and Productivity Boards (RTWPB) of each region
determine the wage rates In the different regions based on established criteria and shall
be the basis of exemption from income tax.
 Minimum Wage Earners are exempt from income tax on:
1. Minimum wage
2. Holiday pay
3. Overtime pay
4. Night shift differential
5. Hazard pay
MWE with additional "compensation" income in excess of P90,000
* Section 32(B)(7)(E) of the Tax Code in relation to PD 851 as amended by
RA10963 (TRAIN Law) provides that 13th month pay and other benefits received by
officials and employees of public and private entities are exempt from income tax and
creditable withholding tax on compensation, provided,
* An employee who receives/earns additional "compensation" such as
commissions, honoraria, fringe benefits, benefits in excess of the allowable P90,000 (as
amended), taxable allowances and other taxable income other than the statutory
minimum wage, overtime pay, holiday pay, night shift differential, hazard pay shall still
enjoy the privilege of being a minimum wage earner.
MWE with additional "business" income * Minimum wage earners receiving other
income such as:
- income from the conduct of trade,
- business or practice of profession,
- except income subject to final tax in addition to compensation income are not
exempted from income tax on their entire income earned during the taxable year.

HAZARD PAY GIVEN TO MINIMUM WAGE EARNERS

* Working in hazardous workplaces, such as high structures without protective
facilities or open structures with adverse conditions, can result in health-related risks
such as radiation, contamination, communicable/infectious diseases.
* or on an open structure where adverse conditions such as darkness, lightning,
fumes/gases, steady rain, or high wind velocity exist, work were primarily health-related
that may result to radiation/contamination /communicable/infectious.
 However, exposures to hazard which affects the entire population in a locality as
air, land, and water borne and noise hazards are compensable under these
Regulations.
Under RR 10-2008, the following are considered "hazardous workplaces."
1. Where the nature of work exposes the workers to dangerous environmental
elements, contaminants or work conditions including ionizing radiation, chemicals, fire,
flammable substances, noxious components and the like;
2. Where the workers are engaged in construction work, logging, fire-fighting, mining,
quarrying, blasting, stevedoring, dock work, deep-sea fishing and mechanized farming;
3. Where the workers are engaged in the manufacture or handling of explosives and
other pyrotechnic products;
4. Where the workers use or are exposed to power driven or explosive powder actuated
tools;
5. Where the workers are exposed to biologic agents such as bacteria, fungi, viruses,
protozoa, nematodes, and other parasites.

Senior Citizen’s & PWD

Reporter: (Jose Angelo Beronio)

Generally, Senior Citizen and PWD's are subject to income tax in the same
manner as an ordinary individual taxpayer. Hence, qualified Senior Citizens and PWD's
deriving returnable income during the taxable year, whether from compensation or
otherwise, are required to file their income tax returns and pay the tax as they file the
return.
Likewise, if the aggregate amount of gross income earned by the Senior Citizen/
PWD during the taxable year does not exceed ₱250,000 he shall be exempt from
income tax and shall not be required to file income tax return. Consequently, a Senior
Citizen/PWD can still be liable for the other taxes such as:
1. The 20% final withholding tax on interest income from any currency bank deposit.
2. The 15% final withholding tax on interest income from a depository bank under the
expanded foreign currency deposit system.
3. Pre-termination of long-term deposit or investment under Section 24(B)(1) of the tax
code.
4. The 10% final withholding tax - on cash and/or property dividends actually or
constructively received from a domestic corporation or from a joint stock company,
insurance or mutual fund company and regional operating headquarters of a
multinational company.
5. The capital gain tax from sales of shares of stock not traded in the stock exchange.
6. The 6% final withholding tax on presumed capital gains from sale of real property,
classified as capital asset, except capital gains presumed to have been realized from
the sales or deposition of principal residence.
7. Other taxes
- a Senior Citizen/PWD shall also be subject to the following internal revenue taxes,
among others, imposed under the tax code.
- Value Added Taxes or other Percentage Taxes. If he is self-employed or engaged in
business or practices of profession and his gross annual sales and/or receipt exceed
the revised Vat threshold of ₱3,000,000 or such amount to which this may be adjusted
pursuant to Sec. 109 of the tax code, he shall subjected to Vat.
Benefits for Senior Citizen and PWD's Senior Citizen and PWD's as the case may be
under the law are entitled to ths following benefits.
- 20% discount and exemption from Vat on the purchase of specified goods and
services.
- 5% discount on basic and prime commodities.
- ₱500 monthy social pension, for indigent Senior Citizen.
- Death Benefit Assistance
-5% discount on utilities and
- Income tax exemption for minimum wage earners for Senior Citizen/PWD's whose
annual taxable income is not more thank ₱250,000.

Taxation of Alien Individuals employed by POGO’s or OGL’s

Reporter: (Jescor Paulo Corbilla)

TAXATION OF ALIEN INDIVIDUALS EMPLOYED BY AN OFFSHORE GAMING

LICENSEE (OGL) OR PHILIPPINE OFFSHORE GAMING OPERATIN (POGO) AND
ITS SERVICE PROVIDERS under RA 11590 and RR 20-2021, regardless of residency
and term and class of working permit or visa
 Section 3 of RA 11590, also known as An Act taxing Philippine Offshore Gaming
Operations (POGOS)", added a new paragraph of Section 25 of the Tax Code,

"(G) Alien Individuals Employed by an Offshore Gaming Service Providers. -

Licensee and Allen individuals regardless of residency and who are employed
and assigned in the Philippines, regardless of term and class of working or employment
permit or visa, by an offshore gaming licensee or its service provider as defined in
Section 22(II) and Section 27(G) of the Tax Code, as amended.

Applicable Income Tax

TYPE OF INCOME INCOME TAX PER MONTH

Gross income** from OGL 25% FWT or P12,500 per month,

whichever is higher

Income from all other sources Subject to pertinent income tax

imposed
within the Philippines the Tax Code, as amended

"Gross Income (whether in cash or in kind):

 Basic salary/wages, annuities, compensation, remuneration and other
emoluments, such as honoraria and allowances, received from such service
provider or offshore gaming licensee,
 OGLS and Service Providers shall submit to the Bureau of Internal Revenue
(BIR) the original copy of notarized contract of employment clearly stating therein
the annual salary and other benefits and entitlements of the concerned alien.

The FWT shall be withheld and remitted monthly by the employer, including
corresponding penalties, interests and surcharges, if any, in accordance with RR 2-98,
as amended.

All foreign employees of OGLS and their Service Providers, regardless of nature of
employment, shall have a Tax Identification Number (TIN). All OGLS and service
providers that employ or engage a foreign national without the foregoing shall be liable
for a fine of Twenty thousand pesos (P20,000.00) for every foreign national without such
TIN and, in proper instances, revocation of their primary and other licenses obtained
from government agencies and/or perpetual or temporary ban in employing or engaging
foreign nationals for their operations: Provided, That the foreign national concerned
shall still pay, and the employer shall remit, any corresponding taxes, penalties,
interests, and surcharges due in accordance with the Tax Code, as amended.

DEFINITION OF TERMS (RR 20-2021)

 PHILIPPINE OFFSHORE GAMING OPERATION (POGO) refers to the
operation by an OGL of online games of chance or sporting events via the
internet using a network and software program, exclusively for offshore
customers/players who are non-Filipinos. The term POGO shall also refer
to OGLS and Accredited Services Providers.

 OFFSHORE GAMING LICENSEE (OGL) refers to an offshore gaming

operator, whether organized in the Philippines (Philippine-based) or abroad
(Offshore or foreign-based), duly licensed and authorized through a gaming
license issued by a POGO Licensing Authority to conduct offshore gaming
operations, including the acceptance of bets from offshore customers. OGLS
are also referred to as Interactive Gaming Licensee (IGL) by other POGO
Licensing Authorities. OGLS shall be considered in doing business in the
Philippines.

 ACCREDITED SERVICE PROVIDER refers to a natural person regardless of

citizenship or residence, or juridical person regardless of place of
organization, which provides ancillary services to an OGL or any other
offshore gaming operator with license acquired from other jurisdictions.

SAMPLE ANCILLARY SERVICES (RR 20-2021)

 Customer and technical relations support

 Information technology
 Gaming software
 Data provision
 Payment solutions
 Live studio and streaming services

 POGO Licensing Authority Refers to Philippine Amusement and Gaming

Corporation (PAGCOR) or any other special economic zone authority, tourism
zone authority or freeport authority authorized by their respective charters to
issue gaming licenses and accreditation to POGO entities.

 OGL-Gaming Agent Refers to a representative in the Philippines of a

foreign-based OGL who shall act as a resident agent for the mere purpose of
 receiving summons, notices and other legal processes for the OGL and to
comply with the disclosure requirements of the

FILING OF INCOME TAX RETURNS (ITR)

Reporter: (Ashley Mae Buctuan)

BASIC TAX

•FOR PURELY COMPENSATION INCOME EARNERS:

➤Once a year only (unless qualified for substituted filing)

➤On or before April 15 of the following year.

•FOR BUSINESS INCOME EARNERS including income from practice of profession:

➤The individual taxpayer is required to file a quarterly tax return on or before the
following dates (regardless of the results of operations):

1st Quarter May 15

2nd Quarter Aug. 15 (45 days after end of Quarter)

3rd Quarter Nov. 15 (45 days after end of Quarter)

Final adjusted/annual return April 15 of the succeeding year

SUBSTITUTED FILING OF ITR

Under RA 9504 and RR 10-2008, individual taxpayers may no longer file income
tax return on or before April 15 of the following taxable year provided the taxpayer
is/has (all the requirements must be satisfied):

1. Receiving purely compensation income, regardless of amount.

2. The amount of income tax withheld by the employer is correct (Tax due = Tax
withheld)

3. Only one employer during the taxable year.

4. If married, the employee's spouse also complies with all three aforementioned
conditions, or otherwise receives no income.

FINAL WITHHOLDING TAX ON PASSIVE INCOME

PRIOR to 2018 January to November 10th day of the month following the
month the withholding was made
December January 15 of the succeeding year

Beginning 2018

For Final and Creditable Withholding taxes, the retum shall be filed and paid not
later than the last day of the month following the close of the taxable quarter during
which the withholding was made. The power of the Secretary of Finance to require
withholding agents to pay or deposit taxes deducted or withheld at more frequent
intervals is repealed under RA10963.

❖ CAPITAL GAINS TAX

a) Shares of stock

• Ordinary Return - within 30 days after each transaction • Final Consolidated Return-on
or before April 15 of the following year

b) Real Property-within 30 days following each sale or other

MANNER OF FILING

Filing of ITR may be made through:

a) Manual Filing

b) Electronic Filing and Payment System (EFPS)

c) eBIR Forms

Payment

Generally, the income tax payable shall be paid at the time the return is filed
(also known as "Pay as you file system"). The deadline for filing is discussed in the
preceding page. However, RA 10963 (TRAIN Law) provides, that, when the tax due is in
excess of P2,000, the individual taxpayer may elect to pay the tax in two equal
installments as follows:

1st installment at the time of filing the annual ITR.

2nd installment on or before October 15 following the

close of the calendar year.

Place of Filing the ITR

The Income tax return shall be filed and paid with any of the following:

➤ Authorized agent banks,

➤ Revenue District Officer

➤ Revenue Collection Officer or duly authorized city or municipal Treasurer in which

the taxpayer has his legal residence or principal place of business in the Philippines or if
there be no legal residence or place of business in the Philippines, with the Office of the
Commissioner of Internal Revenue.

For "With Payment" Returns

File the return in with the Authorized Agent Bank (AAB) of the place where the
taxpayer registered or required to be registered. In places where there are no AABs, the
return shall be filed directly with the Revenue Collection Officer or duly Authorized
Treasurer of the city or municipality in which such person has his legal residence or
principal place of business in the Philippines, or if there is none, filing of the return will
be at the Office of the Commissioner.

For "No Payment" Returns (refundable, break-even, exempt and no operation)

File the return with the concerned Revenue District Office (RDO) where the
taxpayer is registered. However, "no payment" returns filed late shall be accepted by
the RDO but shall be filed with an AAB or Collection Officer/Deputized Municipal
Treasurer (in places where there are no AABS, for payment of necessary penalties.

Individuals Required to File ITR

1) Individuals engaged in business and/or practice of profession, regardless of the

results of operations. 2) Individuals deriving compensation from two or more employers
concurrently or successively at any time during the taxable year.

3) Employees deriving compensation income, regardless of the amount, whether from a

single or several employers during the calendar year, the income tax of which has not
been withheld correctly (ie, tax due is not equal to the tax withheld) resulting to
collectible or refundable return.

4) Individuals deriving other non-business, non-profession-related income in addition to

compensation income not otherwise subject to final tax.

5) Individuals receiving purely compensation income from a single employer, although

the income tax of which has been correctly withheld, but whose spouse is required to
file income tax return.

6) Non-resident alien engaged in trade or business or in the exercise of profession in

the Philippines
Individuals NOT Required to File ITR

1. An individual earning purely compensation income whose taxable income does not
exceed P250,000.

2. An individual whose income tax has been correctly withheld by his employer,
provided that such individual has only one employer for the taxable year - the Certificate
of Withholding filed by the respective employers, duly stamped "Received by the
Bureau, shall be tantamount to the substituted filing of income tax returns by said
employees.

3. An individual whose sole income has been subjected to final withholding tax.

4.Minimum wage earners

Preparation of Income Tax Return

Juan Dela Cruz is a MIXED INCOME EARNER. He is a self-employed resident citizen

and is currently the finance manager of Omega Corporation. The following data were provided
for the taxable year:
1. How much is his total income tax expense assuming he opted to be taxed at 8%?

a. P321 500 c. P826 000

b. P788 500 d. P358 000

ANSWER: C

SOLUTION:

Income from Self-Employed:

COMPENSATION INCOME:

Compensation + excess of 13th moth pay (1 800 000 + 150 000)

Less P90 000 = P 1 860 000

Add:

Basic tax on compensation income:

1st P800 000 P130 000

Excess over P800 000

= P1 060 000 x 30% 318 000 448

000

TOTAL BASIC INCOME TAX P672 000

• If the self-employed or practitioner is a mixed income earner, the 8% income tax

rate I based on Gross Sales and/or receipts and other non operating income
without deducting P250 000.

• The compensation income is not subject to 8% tax rate

2. How much is the income tax payable of Juan for the year?

a. P28 000

b. P196 000

c. P448 000

d. P672 000

ANSWER: B
SOLUTION:

COMPENSATION INCOME:

Compensation + excess of 13th moth pay (1 800 000 + 150 000)

Less P90 000 = P 1 860 000

Add:

Basic tax on compensation income:

1st P800 000 P130 000

Excess over P800 000

= P1 060 000 x 30% 318 000 448 000

TOTAL BASIC INCOME TAX P672 000

Less:

Creditable withholding tax on compensation income (448 000)

Creditable withholding tax on sale of goods (28 000)

INCOME TAX PAYABLE P196 000

Daniel B. Pena Memorial College Foundation
S.Y. 2023-2024

INCOME TAXATION
( Report Handouts )

GROUP 1:
Bienna Mae S. Cuebillas
Jessica B. Baloncio
Angelic Brutas
Jose Angelo Beronio
Jescor Paulo Corbilla
Ashley Mae Buctuan